YUM Yum Brands Inc

By Maria Armental 

Yum Brands Inc.'s profit rose in the March quarter as its China business continued to show signs of recovery, posting its third consecutive quarterly increase in a key sales metric.

Citing the results, the Louisville, Ky., company raised its projections for growth in core operating profit to 12%, adjusted for currency conversions, from its previous target of a 10% improvement.

Shares, up 2% over the past 12 months, rose 4% to $85.80 in after-hours trading.

The China business, which accounts for about half of the company's revenue and that Yum plans to spin off by year's end, reported an 11% system sales increase, adjusted for currency conversions, and a 6% increase at restaurants open for at least a year, the third consecutive quarterly increase. Restaurant margin, meanwhile, improved 3.5 percentage points to 22.4%.

In addition to planning to spin off the once fast-growing business, which had weakened by food-safety scares and stiffer competition, Yum is considering selling a stake in the business, The Wall Street Journal reported last month, citing people familiar with the situation.

As part of the planned spinoff, Yum has pledged to return $6.2 billion to shareholders before the separation is complete.

Yum was the first major Western fast-food company in China, opening a KFC near Beijing's Tiananmen Square in 1987 and building the brand into the largest foreign-restaurant chain in the country.

Over all, for the period ended March 19, Yum reported a profit of $391 million, or 93 cents a share, compared with $362 million, or 81 cents a share. Excluding certain items, including costs tied to the planned separation of the China business, profit rose to 95 cents a share from 80 cents a year earlier.

Revenue, which includes franchise and license fees, eased 0.1% to $2.62 billion.

Analysts surveyed by Thomson Reuters had projected 83 cents a share on $2.65 billion in revenue.

System sales at KFC rose 5% in the latest quarter, also adjusted for currency conversions, while Taco Bell reported a 3% increase and Pizza Hut a 4% increase.

Company sales declined 7% at KFC division, 3% at Taco Bell at 8% at Pizza Hut.

Write to Maria Armental at maria.armental@wsj.com

(END) Dow Jones Newswires

April 20, 2016 17:09 ET (21:09 GMT)

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